A merger between two Italian banks offers hope to a fragmented industry
THE engagement has been a long and tumultuous one, but a wedding date has finally been set. Banco Popolare and Banca Popolare di Milano, two northern Italian banks, have been courting one another for months. Their proposed merger—the first big one in the euro zone since the European Central Bank (ECB) took over supervision of the currency area’s biggest lenders in 2014—would create Italy’s third-biggest lender, and perhaps kickstart an overdue consolidation of Italian banks. But the ECB’s demand that the merged bank hold a bigger cushion of capital and dispose of its bad debts faster almost pushed the couple apart. In the end, however, Banco Popolare agreed to raise €1 billion in capital to smooth the path to the altar.
Shares in Italian banks are down by 25% so far this year; Monte dei Paschi di Siena (MPS), the world’s oldest and Italy’s third-biggest bank, has lost 51% of its value. Part of the problem is that there are simply too many of them: Italy has more bank branches than restaurants. It has 64 for every 100,000 people, far more than the euro-area average of 37. The branches belong to some 680 banks. The five biggest of these…Continue reading